Moneylenders' Act

By trans

fer.

for the amount due. The holder in due course of a negotiable instrument discounted by a preceding holder at a rate over 12 per cent. may recover the amount thereof, but the party paying may reclaim from the money-lender any amount paid for interest or discount above the amount allowed by the Act. Any money-lender violating the Act is guilty of an indictable offence and liable to imprisonment for a year or to a penalty not exceeding $1,000.

The section would protect the holder in Canada of a foreign bill, which might have been voided for violation of the foreign usury laws. It will be observed that it is not merely a holder in due course, or even a holder for value that is protected; but any holder who had not at the time of the transfer to him of the bill, actual knowledge of the illegality.

NEGOTIATION.

Sections 60 to 74 inclusive treat of the negotiation of bills. The Act treats only of the negotiation or transfer of bills according to the law merchant, that is, by delivery when a bill is payable to bearer, and by endorsement and delivery when it is payable to order.

Other methods by which negotiable bills may be transferred, or the methods by which non-negotiable bills may be transferred, are not considered at all. These are left to the operation of the ordinary laws. It is to be observed that by none of these other methods can a transferee become a holder in due course or acquire greater rights than were possessed by the transferrer.

Thus bills, whether negotiable or non-negotiable, may pass by death, by assignment in bankruptcy, by ordinary execution, by gift, by donatio mortis causa, or by any method recognized by the law of the respective provinces.

60. A bill is negotiated when it is transferred from one person to another in such a manner as to constitute the transferee the holder of the bill. 53 V., c. 33, s. 31 (1). Imp. Act, ibid.

Holder" has been defined in section 2 as the payee or endorsee of a bill or note who is in possession of it, or the

bearer thereof. He need not be the owner, he may have it merely for discount, collection or the like, or may even hold it unlawfully; so that the negotiation of a bill or note is not necessarily a sale of the instrument, but may be a pledging or a mere transfer of possession, provided the transferee is in a position thereby to acquire the status of a holder as above defined. As to the rights of a holder, see section 74.

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In Herdman v. Wheeler, [1902] 1 K. B. 361, it was held that the delivery of the note of a third party to the payee who gave value for it was not a negotiation of it within the meaning of what in the Canadian Act is section 32 or 56; that the note was issued to him, but not "negotiated." This case was questioned in Lloyd's Bank v. Cooke, [1907] 1 K. B. 794; but the Court did not find it necessary to decide the point. Fletcher Moulton, L.J., however, expressed his opinion that it was negotiated to the payee and that he became a holder in due course under sections corresponding to 32 and 56, a view affirmed by the Court of Appeal in Glenie v. Bruce Smith, [1908] 1 K. B. 263.

The decisions in the United States have also been conflicting. Hall v. Cordell, 142 U. S. 116 (1891), Blakeston v. Dudley, 5 Duer (N.Y.) 373 (1856), Vander Ploeg v. Van Zunk (Iowa) 112 N. W. R. 807 (1907) agree with Herdman v. Wheeler. Contra, Boston Steel & Iron Co. v. Steuer, 183 Mass. 140 (1903); Thorpe v. White, 188 Mass. 333 (1905).

In Crouch v. Credit Foncier, L. R. 8 Q. B. (1873), at p. 381, Lord Blackburn speaks of negotiation as follows:"In the notes to Miller v. Race in Smith's Leading Cases, where all the authorities are collected, the very learned author says: "It may therefore be laid down as a safe rule, that where an instrument is by the custom of trade transferable, like cash, by delivery, and is also capable of being sued upon by the person holding it pro tempore, then it is entitled to the name of a negotiable instrument, and the property in it passes to a bona fide transferee for value, though the transfer may not have taken place in market overt.' Bills of exchange and promissory notes, whether payable to order or to bearer, are by the law merchant negotiable in both senses of the word." See also Wookey v. Pole, 4 B. & Ald. at p. 10 (1820); and Swan v. N. B. Australasian Co., 2 H. & C. at p. 184 (1863).

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Where a merchant in London, England, drew upon a firm in Toronto, who accepted payable in London, it was held Negotia that the bill was not negotiated in Upper Canada within the meaning of the statute 12 Vict. c. 76: Foster v. Bowes, 2 U. C. P. R. 256 (1857).

tion.

By

delivery.

By endorsement.

The validity of the transfer of a bill like that of a chattel is determined by the law of the country where the transfer takes place: Embericos v. Anglo-Austrian Bank, [1905] 1 K. B. 677.

One who personates the holder or makes title through a forged indorsement is not the holder: Smith v. Union Bank, L. R. 10 Q. B. 295 (1875).

2. A bill payable to bearer is negotiated by delivery. 53 V., c. 33, s. 31 (2). Imp. Act, ibid.

Bearer is defined in section 2 as the person in possession of a bill or note which is payable to bearer, that is, one which is expressed to be so payable, or on which the only or last endorsement is in blank, or where the payee is a fictitious or non-existing person: sec. 21. Delivery is transfer of possession, actual or constructive, from one person to another: sec. 2. The conditions and presumptions regarding delivery are set out in sections 40 and 41.

Where the holder of a bill payable to bearer negotiates it by delivery without endorsing it, he is called a transferrer by delivery: see 137. See section 138 and the notes thereon as to the liability of a transferrer by delivery.

The holder of a bill payable to bearer may endorse it before delivering it, and he then becomes an endorser and liable as such; but in such a case the endorsement is no part of the negotiation but precedes it: sec. 131.

3. A bill payable to order is negotiated by the endorsement of the holder completed by delivery. 53 V., c. 33, s. 31 (3). Imp. Act, ibid.

A bill is payable to order which is expressed to be so payable, or which is expressed to be payable to a particular person, and does not contain words prohibiting transfer, or

indicating an intention that it should not be transferable: § 60 sec. 22. The conditions necessary to a valid endorsement By enare set out in section 62 and the different kinds of endorse- dorsement in sections 63 and 64. The endorsement and delivery ment. must be by the same person. The delivery in order to be effectual must be made either by or under the authority of the party endorsing: sec. 40. Where the payee of a note indorsed it in blank before his death, and his executrix delivered it to plaintiff, it was held that the latter could not recover: Bromage v. Lloyd, 1 Ex. 32 (1847); Clark v. Boyd, 2 Ohio 56 (1825); Clark v. Sigourney, 17 Conn. 511 (1846).

A promissory note executed before a notary in Quebec is an ordinary promissory note and negotiable by indorsement in the ordinary way: Morrin v. Legault, 3 L. C. J. 55 (1859); Aurèle v. Durocher, 5 R. L. 165 (1873); overruling Brunet v. Lalonde, 16 L. C. R. 347 (1866), where it was held that it could be negotiated only by special indorsement.

A bill of exchange was indorsed to the order of the Bank of Nova Scotia at Amherst, and by the agent at Amherst to the order of the Bank of Nova Scotia at Halifax "for collection." It was dishonoured by non-payment and returned to the agent at Amherst, who sold it to L. without indorsing it. L. was sued by the assignee of the drawers, and pleaded the bill by way of set-off. Held, that he could not do so without indorsement: Forsyth v. Lawrence, 19 N. S. 148; 7 C. L. T. 174 (1886).

Plaintiff sued on notes alleging himself to be the holder. The payee had indorsed them, but his indorsement was erased. Held, that plaintiff had shown no title. Hempsted v. Drummond, 10 L. C. R. 27 (1859).

On the death of the holder of a bill payable to his order all his rights pass to his executors or personal representatives, who may negotiate it by indorsement: Robinson v. Stone, 2 Str. 1260 (1746). So also if a bill be made payable to a dead man in ignorance of his death: Murray v. E. I. Co., 5 B. & Ald. 204 (1821).

Note sued upon indorsed in blank by plaintiffs the payees. Defence that this shows they have no interest in the note. Held no defence, and even if it had been indorsed specially, as they are in possession of the note, the presumption is that

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Negotiation.

Without endorsement.

the indorsement was never completed by delivery: Canadian Co-operative Co. v. Trauniczek, 8 W. L. R. (Sask.), 550 (1908).

Negotiation in this sub-section is a transfer by the law merchant, and has no reference to a transfer that may take place under the provincial law in various other ways, as by sale or assignment, by transmission, by death, by will, or by gift: Re Barrington, 2 Scho. & Lef. 112 (1804). Where the plaintiff acquired all the assets of an estate including a note payable to order and not indorsed, he could not sue on it as a holder, but only as the purchaser of a debt or right of action, and must give notice to the maker under C. C. 1571: Clonbrock v. Browne, Q. R. 18 S. C. 375 (1906).

61. Where the holder of a bill payable to his order transfers it for value without endorsing it, the transfer gives the transferee such title as the transferrer had in the bill, and the transferee in addition acquires the right to have the endorsement of the transferrer. 53 V., c. 53, s. 31 (1) Imp. Act, ibid.

Such transfer may be made to a purchaser or to a pledgee. While the bill remains payable to the order of the transferrer, the transferee is not the holder of the bill, even if he has given full value for it. Even if he receive it before maturity, he cannot become a holder in due course, and does not acquire a better title than the transferrer had. He holds the bill subject to any defect of title in the transferrer, of which he becomes aware before the endorsement of the bill to him, and if it is not indorsed before maturity, it is subject to any defects of title that existed in the transferrer. This is in accordance with principle. In the interest of commerce, the law makes an exception to the general rule, which is that no person can give to another greater rights than he himself has. This exception being part of the law merchant, it applies only where a transfer takes place according to the law merchant, and the law merchant does not recognize any transfer of a bill payable to order, except by endorsement. The bill is not "negotiated" until it is endorsed, and the transfer dates from that time: Whistler v. Forster, 14 C. B. N. S. 258 (1863).